Moody’s Investors Service, the international rating agency, completed on November 14, 2024 a periodic review of Lebanon’s ratings, where it indicated that the current “C” rating reflects that losses for bondholders are likely to exceed 65%. The agency mentioned that the country’s rating is unlikely to change unless fiscal consolidation and structural reform implementation are undertaken at a much faster pace than current levels and over a number of years on the one hand, and a sizeable improvement in the country’s key debt dynamics (such as economic growth, interest rates, privatization revenues, and capacity to register large primary surpluses) on the other so as to guarantee debt sustainability in the future. The rating agency added that the current hostilities would further deepen Lebanon’s already deep economic, financial and social crisis.

From another standpoint, it is worth clarifying that a rating by the agency takes into consideration four major elements, namely, economic strength, institutional and governance strength, fiscal strength, and susceptibility to event risk. Lebanon scored “caa2” in economic strength given the steep economic contraction and “ca” on the institutional and governance strength front, reflecting the anemic fiscal policy effectiveness. With respect to fiscal strength, the former was assessed as “ca”, a fact that portrays the government’s highly leveraged balance sheet that could result in large losses for creditors in the event of default. Lastly, Lebanon scored “ca” in susceptibility to event risk driven by the country’s liquidity risk & external vulnerability risk, added the high exposure of the banking sector to sovereign debt.